Now hanging in uncertainty, a big US cryptocurrency bill meant to set firmer ground for trading platforms, digital tokens and stablecoins lost its urgent status among Congress leaders. Attention shifting elsewhere, several influential senators paused work on it this week. Talks continue behind the scenes, aiming to fix unresolved parts before moving forward.

Lawmakers Focus On Housing

A handful of senators shift attention toward affordable housing plans linked to US President Donald Trump’s priorities. This move shrinks the chance for quick approval of the cryptocurrency legislation. Time runs short as political energy flows elsewhere.

Now the Banking Committee changed its timeline because of that move, so the expected vote on the bill got delayed for now. This puts a pause on efforts to build one clear system.

Big Industry Pushback

Out of nowhere, Coinbase stopped backing the plan. Its executives said the proposal might limit how stablecoins work, affecting services people rely on. That shift made them step away quietly. Right after, the group in charge paused things as well.

That shift laid bare growing tensions. Not every bank welcomed the rise of stablecoins. Rivalry looms when digital coin returns gain wider reach. Some financial players see threat in that growth.

Industry Response And Market Effects

Fear spread through trading floors. When talks got delayed, digital currencies started falling because people began questioning how much longer the arguing could last – alongside what kind of outcome might finally emerge.

Useful, perhaps, if waiting brings sharper rules. Still, dragging too long risks confusing banks more, leaving them unsure when to act.

Separate Tracks Emerge

Ahead of the curve, some lawmakers are eyeing a fresh approach where certain digital tokens fall under commodity rules. This version, quietly shared by the Senate Agriculture team, might follow its own path forward – timing unclear.

While others debate classification, this draft sidesteps the main gridlock and suggests an alternate route through regulatory terrain.

One path might still move forward, even if the Banking Committee’s proposal gets stuck. Still, running two versions at once brings up concerns – how will they merge them should both make it to debate?

Crypto Bill: What Might Happen Next

Few believe it’s dead, though time slips fast. Elections loom; attention wanders. Agreement must come soon, or nothing sticks.

Some members of Congress quietly say pushing into late February could kill chances, yet backers still meet out of view to adjust the proposal and pull in more votes.

Featured image from Unsplash, chart from TradingView

Cryptocurrency exchange Coinbase (COIN) recently retracted its support for the latest iteration of the crypto market structure bill, known as the CLARITY Act, just 24 hours before a crucial markup was scheduled. 

This signals significant concerns about the bill’s alignment with the interests of cryptocurrency firms compared to traditional banking institutions, not only for the exchange but also for broader market participants.

Coinbase CEO’s Concerns Over Fair Competition

On Friday, Coinbase CEO Brian Armstrong elaborated on the rationale behind the exchange’s withdrawal in an appearance on FOX Business, expressing his frustration with the notion that banks could use regulatory means to stifle competition in their favor. 

“It just felt deeply unfair to me that one industry [banks] would come in and get to do regulatory capture to ban their competition,” Armstrong stated. He also underscored the importance of a level playing field, asserting that competition should thrive without undue interference from powerful financial entities.

Coinbase CEO emphasized that his concerns resonate with “much of the industry,” highlighting his obligation to advocate for customers who he believes are being shortchanged by the provisions of the proposed market legislation. 

“I declined to opine on the exact—whether the hearing, the markup should happen or not… But I did feel like I had to speak up on behalf of our customers and all Americans here,” he articulated.

Debate Heats Over CLARITY Act

Central to the ongoing debate surrounding the CLARITY Act is a critical disagreement between banks and crypto firms regarding the fate of stablecoin holders and whether they should be entitled to receive reward payments. 

Armstrong has previously raised alarms that the bill might prohibit tokenized equities, impose restrictions on decentralized finance (DeFi), and expand governmental access to financial data, thereby compromising individual privacy. 

Furthermore, he warned that the legislation could shift regulatory authority away from the Commodity Futures Trading Commission (CFTC) and towards the Securities and Exchange Commission (SEC), sidelining competition within the crypto space.

Armstrong Critiques Banking Lobbying Tactics

Armstrong noted the irony in the current situation, pointing out that while banks are indeed leveraging the advantages of cryptocurrency, their lobbying efforts seem aimed at restricting competing firms. 

“Many of these banks are actually very smart,” he acknowledged, referencing the commercial side of banking that is increasingly engaging with crypto. “They’re actually doing deals with Coinbase. We’re powering a lot of crypto and stablecoin infrastructure for them on the commercial side.”

Despite his criticisms of the banking sector’s lobbying tactics, Armstrong expressed optimism that legislators could ultimately resolve the outstanding issues within the crypto market structure bill:

And then their lobbying arm comes to D.C. and thinks of it as very zero-sum and is trying to kill the competition. So, I suspect, like many things, if we get the principles in the room, we can actually get this figured out and make a good deal.

Featured image from DALL-E, chart from TradingView.com 

As the January 15 markup of the crypto market structure bill—known as the CLARITY Act—draws closer, reports indicate that Coinbase (COIN) is reconsidering its support for the legislation. 

A Monday report from Bloomberg suggests this shift in position is contingent on whether the anticipated bill includes provisions beyond enhanced disclosure requirements tied to stablecoin rewards.

High Stakes For Coinbase

The CLARITY Act is expected to be marked up in at least one Senate committee this Thursday, and Coinbase’s potential withdrawal could have significant implications for the bill. 

A source familiar with Coinbase’s stance told Bloomberg that the exchange would re-evaluate its support if the legislation veers too far from its interests, particularly regarding stablecoin incentives.

Some insiders suggest the bill might restrict the ability to provide rewards to regulated financial institutions, a move that aligns with the banking sector’s concerns about losing deposits to crypto platforms.

Coinbase currently holds applications for a national trust charter that could permit it to offer those kinds of rewards under regulatory rules. However, many crypto-native firms are pushing back against potential restrictions, arguing that such measures could disrupt competition in the market.

The stakes for Coinbase are high, as rewards programs play a crucial role in its business model. The exchange allows users to earn 3.5% rewards on Circle’s USDC holdings. 

Should the market-structure bill include bans on these incentives, fewer users might choose to hold stablecoins on the platform. This could jeopardize an anticipated revenue stream projected at $1.3 billion in 2025, according to Bloomberg.

Banking Vs. Crypto

The GENIUS Act, passed into law in July of last year, prohibits stablecoin issuers from offering interest on token holdings, and does not prevent third-party partners like Coinbase from providing rewards tied to customer balances. 

The banking industry, however, argues that allowing exchanges to pay such rewards could negatively impact bank deposits and, consequently, community lending. 

As reported by Bitcoinist over the past month, the American Bankers Association (ABA) has voiced concerns that this situation could displace “billions” from local lending, allegedly harming small businesses and households.

In contrast, Faryar Shirzad, Coinbase’s chief policy officer, has argued that maintaining rewards tied to stablecoins is crucial for preserving the dollar’s dominance, especially in light of China’s announcement to start offering interest on its digital yuan.

Banking Lobby Fights Back

A potential compromise being discussed would permit only licensed banking entities or financial institutions to provide rewards on stablecoin balances. 

Recently, five crypto firms, including Ripple, Circle, and Paxos, received conditional approvals from the US Office of the Comptroller of the Currency (OCC) to become national trust banks, a move met with opposition from the banking lobby. 

If restrictions are indeed imposed, the report suggests that this could lead to creative workarounds as crypto firms seek alternative ways to reward customers. 

Featured image from DALL-E, chart from TradingView.com

In a major new development for the crypto industry, Senators Ron Wyden and Cynthia Lummis announced on Monday evening the introduction of a bipartisan, standalone version of the Blockchain Regulatory Certainty Act (BRCA). 

This legislation aims to provide much-needed clarity for software developers and infrastructure providers in the blockchain space, particularly concerning their classification under federal law.

New Crypto Bill To Protect Blockchain Developers 

According to the detailed press release regarding the matter, the BRCA specifies that developers and providers who do not have control over user funds will not be classified as money transmitters. Senator Lummis highlighted the ongoing challenges faced by blockchain developers, stating: 

Blockchain developers who have simply written code and maintain open-source infrastructure have lived under threat of being classified as money transmitters for far too long. This designation makes no sense when they never touch, control, or have access to user funds, and unnecessarily limits innovation. 

Lummis emphasized that the bill provides developers with the clarity needed to advance digital finance without the fear of legal repercussions for activities that do not pose a money laundering risk. Lummis added, “It’s time to stop treating software developers like banks simply because they write code.”

Senator Wyden echoed these concerns, arguing that imposing the same regulatory requirements on developers as those applied to exchanges or brokers is fundamentally flawed. 

Main Highlights Of The BRCA

The Blockchain Regulatory Certainty Act aims to set clear federal standards defining when blockchain developers and service providers can be exempt from money transmitter regulations. 

Under current legislation toward crypto, the Senators assert blockchain developers face regulatory ambiguities that have not only stifled innovation but also driven many projects offshore, as they navigate conflicting regulations across different states.

The bill specifically establishes that a “non-controlling developer or provider” refers to any entity that develops or maintains distributed ledger technology but does not possess the unilateral authority to initiate or execute transactions involving users’ digital assets without third-party consent.

In addition, the crypto bill clarifies protected activities, including the development or publication of software for distributed ledgers, maintenance services for blockchain networks, offering customer self-custody solutions, and providing necessary infrastructure to support distributed ledger services. 

Importantly, while the bill allows states to enforce their laws consistent with federal regulations, it also prevents them from imposing money transmitter requirements on developers engaged solely in the specified protected activities.

Featured image from DALL-E, chart from TradingView.com